WASHINGTON – A bipartisan group of lawmakers, aided by banking and housing groups, are beginning a strong lobbying push to forestall a scheduled drop in the maximum sizes of mortgages backed by the government-sponsored enterprises.
But their efforts face an uphill climb due to heavy opposition from two unlikely allies: House Republican leadership and the Obama administration, according to some analysts.
Industry representatives and congressional advocates warn that the scheduled Oct. 1 drop in loan limits would mean a tightening of mortgage credit, particularly in certain expensive areas such as San Francisco and New York. Those analysts told American Banker, an affiliate of Credit Union Journal, that allowing the higher limits to expire would harm both the housing market and the broader economy.
“If we don't extend them, and they’re allowed to drop, you’ll take what is already a struggling housing market and further depress it,” said Rep. John Campbell (R-CA). “Housing prices will further decline.” Campbell and Rep. Gary Ackerman (D-NY) have co-sponsored a bill that would extend the elevated limits through Sept. 30, 2013.
Sens. Robert Menendez (D-NJ), Johnny Isakson (R-GA) and Dianne Feinstein, (D-CA), meanwhile, this week introduced a bill that would extend the higher limits until Dec. 31, 2013.
Despite the bipartisan collection of lawmakers, however, House Republican leadership is on the same page, at least for now, as the White House. Both have said they oppose any extension in order to allow the private sector back into the mortgage market.
“The White House wants to move away from that. Republican leadership wants to move away from that,” said Rep. Scott Garrett, R-N.J., who chairs the House subcommittee on capital markets and government-sponsored enterprises, in an interview. “There’s enough room on the banks’ balance sheets to absorb this hit, so I think it’s a necessary next step.”
The current elevated limits on loans backed by Fannie Mae, Freddie Mac and the Federal Housing Administration are the result of a series of steps that Congress took, starting in 2008, to bolster the faltering U.S. housing market.
As recently as early 2008, with a few exceptions, Fannie and Freddie would not back a mortgage of more than $417,000. Today the buyer of a single-family home in high-cost parts of the country can get a Fannie or Freddie-backed mortgage for up to $729,750. Unless Congress takes action, that figure will drop at the end of September to $625,500, American Banker reported.
